The Global West: how foreign investment fuels resource extraction in western states

An American flag flaps in the wind on a ranch near Douglas, Wyoming. The area is part of the Niobrara Shale Formation in which the Chinese are invested.

Michael Shane Smith

A loaded China Shipping Line container ship makes its way down the main channel at the Port of Los Angeles.

Tim Rue/Bloomberg via Getty Images

The Climax Molybdenum Mine in central Colorado, closed for more than a decade, held a job fair in February, and is gearing up to reopen, market conditions permitting.

Robert Moran

U.S. Sen. Harry Reid (center), Democrat from Nevada, and Republican Jon Huntsman (far left), former Utah governor and now candidate for president, meet with Wu Bangguo, chairman of the Standing Committee of the National People's Congress, during a mission to China in April. Nine other U.S. senators traveled to China for talks on topics from clean energy to human rights.

Douglas, Wyo., population 5,000 and home of the legendary jackalope, lies in an almost puritanical landscape -- beautiful, yet shy about that beauty, concealing it modestly under a beige blanket of grass and shrubs. A collection of low-slung stone and brick buildings sits at the town's center, with tree-shaded residential neighborhoods radiating out from it. Ford, GM and Chevrolet pickups dominate local traffic, along with the occasional bus carrying workers from the North Antelope Rochelle coal mine nearby. After their shifts, miners and roughnecks can grab a burger and fries at The Koop, a steak at Clementine's Cattle Company, or a mean enchilada and a beer over at La Costa Restaurant.

Over beers, they might talk about politics, though without a lot of disagreement: Eight out of 10 voters in Converse County go Republican. Perhaps they'll speculate as to whether the town's other unlikely mammalian hybrid, the Bearcats -- last year's 3A High School State football champs -- will repeat their triumph.

In the summer, emerald-green fields spread out from the North Platte River, which quietly slides past town. Come here in June, and you're likely to breathe in the smell of fresh-cut hay. Any time of year, you can hear Old Glory snapping loudly in the wind over each fourth or fifth doublewide on the fringe of town.

There are plenty of words to describe a place like Douglas: Rural, Western, small-town, typically American. It's the type of place that country-and-Western singers rhapsodize about and city-folk tend to mock. Sarah Palin would likely recognize it as one of "these wonderful little pockets of what I call the real America. ..." Out here, "Drill, baby, drill!" is more than just a slogan, it's a way of life, for better or worse. Locals and politicians will proudly tell you that Wyoming is the backbone of an energy-independent nation.

But look more closely. On a spring morning, when both snow and dust whip through the air, a drill rig can be seen just outside of town. The sign nearby says "Chesapeake Energy," but the rig operates with funding from a Chinese energy company, and it's searching for oil and gas partly owned by the same Chinese company. In another part of Wyoming, a Japanese firm has invested in the same play, called the Niobrara. The massive coal mines to the north ship coal to 25 different states, Europe and Asia. A Russian company controls nearby uranium mines, and on the other side of the state, a company from India owns one of Wyoming's biggest soda ash facilities.

In other words, Douglas and Wyoming are not pure, unadulterated American after all, at least economically speaking. And if Douglas isn't, what community is? Not my hometown of Durango, Colo., on the edge of the San Juan Basin, where British Petroleum has about 3,000 natural gas wells. Not the mining towns of Arizona and Nevada, where Canadian, Australian and Mexican companies own gaping copper and gold mines. Not even the amber fields of Montana, which send wheat to Asia, or the Navajo Nation, which sells hay to Japan. It's the same all over the West: The natural resources that built America are no longer all-American. No matter how many red-white-and-blue flags fly over your trailer park, you too are tangled up in a global economic web that has compressed time and space and confused our ideas of place.

My quest to comprehend the most recent surge of globalization led me to Laramie, then to Douglas, then across the Powder River Basin and finally to Denver, to talk to Vince Matthews. Since 2004, Matthews has been the Colorado state geologist and director of the Colorado Geological Survey. Before that, he worked for three decades in the oil industry. For much of his career, he's observed the globalization of the West's natural resource industries. Lately, Matthews has been traveling around the state telling chambers of commerce, groups of geologists, community leaders and just about anyone else who will listen that he's worried.

Sitting in his downtown Denver office, wearing a suit and tie that would look at home on a Houston oil executive, Matthews says that China and India, with their huge populations and economies growing at rates not seen since the Industrial Revolution, are ravenous for natural resources. Handing me graphs and charts to prove it, he says that their hunger is already washing across the West, driving up the pressure to develop natural resources. He talks about a Chinese businesswoman he knows in Denver, who frequently asks him how her relatives and clients can get hold of a Colorado mine or mineral deposit. And he reminisces about a visit to the Los Angeles port at Long Beach, where he saw ship after ship loaded down with scrap metal, headed for China.

Most exports from Western states go to Canada or Mexico, but over the last decade, China has emerged as one of our biggest customers; U.S. exports to China have increased 460 percent since 2000. Compared to British, Canadian or Australian multinational corporations, Asian companies still have a minuscule investment in Western resources. But over the last year, as much of Asia scrambles out of the global recession unscathed and the U.S. continues to wallow, Chinese, Indian and even former Soviet-bloc companies have bought into American oil and gas fields, molybdenum mines and more.

Even when these countries aren't directly investing in or buying U.S. resources, their appetite for them around the globe is raising prices and spurring new development here in the West, Matthews says. Combine this with a lingering economic downturn here and an attendant desperation for jobs; instability in the Middle East; new drilling and fracking technology that opens up previously inaccessible reservoirs of shale gas and oil; and an infusion of investment capital from other countries into the extractive sectors, and you get a tsunami of globalization that is reshaping the physical and political landscape of the American West.

"In the '70s, Jimmy Carter wanted to make the West into a national sacrifice zone for energy, because the West is where all the reserves are," says Matthews. "It's going to happen again."